Ulta Beauty (ULTA) 8-K Results of Operations and Financial Condition

Exhibit 99.1

Company Contact:
Gregg Bodnar
Chief Financial Officer
(630) 410-4633

Investors/Media Contacts:
Integrated Corporate Relations
Allison Malkin/Stephanie Sampiere
(203) 682-8225/(646) 277-1222

ULTA ANNOUNCES SECOND QUARTER FISCAL YEAR 2008 RESULTS
Second Quarter Net Sales Increases 24.3%
Second Quarter Net Income Increases 67.2%
Second Quarter Diluted EPS of $0.06
Reiterates Full Year Guidance

     Romeoville, IL – September 4, 2008 – Ulta Salon, Cosmetics & Fragrance, Inc. [NASDAQ:ULTA], today announced financial results for the thirteen-week period (“Second Quarter”) and twenty-six-week period (“First Six Months”) ended August 2, 2008, which compare to the same periods ended August 4, 2007.

For the Second Quarter:

• Net sales increased 24.3% to $249.1 million from $200.4 million in the second quarter of fiscal 2007;

• Comparable store sales (sales for stores open at least 14 months) increased 3.7%, compared to an increase of 6.5% in the second quarter of fiscal 2007;

• Gross profit increased 23.9% to $73.1 million, or 29.4% of net sales, from $59.0 million, or 29.4% of net sales in the second quarter of fiscal 2007;

• Operating income increased 46.2% to $7.2 million, which includes incremental pre-opening expenses of $1.2 million. This compares to operating income of $4.9 million in the second quarter of fiscal 2007;

• Net income increased 67.2% to $3.7 million, compared to $2.2 million in the second quarter of fiscal 2007;

• Income per diluted share was $0.06, compared to a loss per diluted share of $0.23 in the second quarter of fiscal 2007; and

• Adjusted income per diluted share was $0.06, compared to adjusted income per diluted share of $0.04 in the second quarter of fiscal 2007. Adjusted income per diluted share excludes the effects of preferred stock dividends and equalizes the

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dilutive effects of the preferred shares and IPO shares for the period. See Exhibit 4 for a complete description of adjusted income per basic and diluted share and reconciliation to the GAAP equivalents.

     Lyn Kirby, Ulta’s President and Chief Executive Officer, stated: “Our compelling shopping experience driven by our ability to satisfy all the beauty needs of women across all categories, including full-service salon, led to another solid performance for Ulta. Despite the difficult economy, we increased sales by 24.3%, delivered a 3.7% comparable store sales increase and opened 18 new stores during the quarter. We continue to deliver increases in customer traffic and average ticket which reinforces our ability to deliver growth with our diversified portfolio of over 500 brands across prestige and mass categories with price points that fit any wallet. The 3.7% comparable store increase was achieved without additional investment in margin, inventory, or advertising. In addition, our corporate infrastructure began to deliver increased leverage during the quarter, as we reported a 70 basis point improvement in SG&A, as a percentage of sales. We attribute our ongoing success in a difficult economy to our proven marketing strategy, solid operational execution and the beauty category, which is more resilient than many retail categories. We remain confident that we are positioned to achieve our annual goals.”

For the First Six Months:

• Net sales increased 23.8% to $488.4 million from $394.6 million in the first six months of fiscal 2007;

• Comparable store sales (sales for stores open at least 14 months) increased 3.8%, compared to an increase of 7.8% in the first six months of fiscal 2007;

• Gross profit increased 24.1% to $147.1 million, or 30.1% of net sales, from $118.5 million, or 30.0% of net sales in the first six months of fiscal 2007;

• Operating income was $15.3 million, which included incremental pre-opening expenses of $3.2 million. This compares to operating income of $14.8 million in the first six months of fiscal 2007;

• Net income was $8.0 million, compared to $7.5 million in the first six months of fiscal 2007;

• Income per diluted share was $0.13, including $0.01 per share of severance costs, and $0.14 per diluted share excluding the severance costs, compared to a loss per diluted share of $0.01 in the first six months of fiscal 2007; the severance costs were not included in the Company’s guidance for the first six months; and

• Adjusted income per diluted share was $0.13, including $0.01 of severance costs, compared to adjusted income per diluted share of $0.13 in the first six months of fiscal 2007. Adjusted income per diluted share excludes the effects of preferred stock dividends and equalizes the dilutive effects of the preferred shares and IPO shares for the period. See Exhibit 4 for a complete description of adjusted income per basic and diluted share and reconciliation to the GAAP equivalents.

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Balance Sheet

     Merchandise inventories at the end of the second quarter totaled $197.0 million, compared to $148.6 million at the end of second quarter fiscal 2007, representing an increase of $48.4 million. Average inventory per store was flat compared to the prior year quarter. The merchandise inventory increase of $48.4 million is due to the addition of 72 net new stores opened since August 4, 2007.

Store Expansion

     During the second quarter, the Company opened 18 stores, one each in Montgomery, AL; Casa Grande, AZ; Gilbert, AZ; Ocala, FL; Wellington, FL; Annapolis, MD; Allen Park, MI; Portage, MI; Fayetteville, NC; Greensboro, NC; Cincinnati, OH; Midwest City, OK; Warwick, RI; Kingsport, TN; Cedar Hill, TX; Lubbock, TX; Riverdale, UT; and Sterling, VA. In addition, the Company remodeled 5 stores, one each in Peoria, AZ; Minnetonka, MN; Dallas, TX; Webster, TX; and Woodlands, TX. The Company ended the second quarter with 283 stores and square footage of 2,938,569, which represents a 34.6% increase compared to the second quarter of fiscal 2007.

Outlook

     The Company is introducing third quarter guidance for fiscal 2008, which reflects the Company’s current business trends and the current retail and economic environment. For the third quarter of fiscal 2008, the Company estimates net sales in the range of $259 million to $263 million, compared to actual third quarter fiscal 2007 net sales of $208.2 million. Comparable store sales are expected to increase in the range of 3% to 5%, compared to a 6.7% increase in the prior year quarter. Income per diluted share is estimated in the range of $0.08 to $0.10. The Company plans to open approximately 21 new stores during the third quarter of fiscal 2008 compared to 26 stores in the third quarter of fiscal 2007.

     The Company is reiterating full year earnings guidance for fiscal 2008. For the full year fiscal 2008, the Company estimates net sales in the range of $1.12 billion to $1.13 billion, compared to actual fiscal 2007 net sales of $912.1 million. Comparable store sales are expected to increase by 3% to 5%, compared to a 6.4% increase last year. Income per diluted share is estimated in the range of $0.52 to $0.57. The Company’s full year guidance excludes the $0.01 per share severance expense. The Company expects to open 63 new stores and remodel 8 stores in fiscal 2008. Capital expenditures for fiscal 2008 are expected to be in a range of $115 million to $120 million.

     The Company’s annual long term growth targets include: (i) comparable store sales increase in the 3% to 5% range; (ii) square footage expansion of 20% – 25%; and (iii) net income growth of 25% – 30%.

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Conference Call Information

     A conference call to discuss second quarter results is scheduled for today, September 4, 2008, at 5:00 p.m. Eastern Time. Investors and analysts interested in participating in the call are invited to dial (877) 407-0784 approximately ten minutes prior to the start of the call. The conference call will also be web-cast live athttp://ir.ulta.com and remain available for 90 days. A replay of this call will be available until midnight (ET) on September 11, 2008 and can be accessed by dialing (877) 660-6853 and entering account number 3055 and conference ID number 295098.

About Ulta

     Ulta is the largest beauty retailer that provides one-stop shopping for prestige, mass and salon products and salon services in the United States. Ulta provides affordable indulgence to its customers by combining the product breadth, value and convenience of a beauty superstore with the distinctive environment and experience of a specialty retailer.  Ulta offers a unique combination of over 21,000 prestige and mass beauty products across the categories of cosmetics, fragrance, haircare, skincare, bath and body products and salon styling tools, as well as salon haircare products. Ulta also offers a full-service salon in all of its stores. The Company currently operates 283 retail stores across 34 states and also distributes its products through the Company’s website: www.ulta.com.

Forward-Looking Statements

     This press release contains “forward-looking statements” within the meaning of Section 21E of the Securities Exchange Act of 1934 and the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, which reflect our current views with respect to, among other things, future events and financial performance. You can identify these forward-looking statements by the use of forward-looking words such as “outlook,” “believes,” “expects,” “plans,” “estimates,” or other comparable words. Any forward-looking statements contained in this press release are based upon our historical performance and on current plans, estimates and expectations. The inclusion of this forward-looking information should not be regarded as a representation by us or any other person that the future plans, estimates or expectations contemplated by us will be achieved. Such forward-looking statements are subject to various risks and uncertainties, which include, without limitation: the impact of weakness in the economy; changes in the overall level of consumer spending; changes in the wholesale cost of our products; the possibility that we may be unable to compete effectively in our highly competitive markets; the possibility that our continued opening of new stores could strain our resources and have a material adverse effect on our business and financial performance; the possibility that new store openings may be impacted by developer or co-tenant issues; the possibility that the capacity of our distribution and order fulfillment infrastructure may not be adequate to support our recent growth and expected future growth plans; the possibility of material disruptions to our information systems; weather conditions that could negatively impact sales and other risk factors detailed in our public filings with the Securities and Exchange Commission (the “SEC”), including risk factors contained in our Annual Report on Form 10-K for the year ended February 2, 2008. Our filings with the SEC are available at www.sec.gov. The Company does not undertake to publicly update or revise its forward-looking statements, whether as a result of new information, future events or otherwise.

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Exhibit 1

Ulta Salon, Cosmetics & Fragrance, Inc.
Consolidated Statements of Income
(In thousands, except per share amounts)
(Unaudited)

	13 Weeks Ended				13 Weeks Ended
	August 2,				August 4,
	2008				2007
Net sales	$	249,111	100.0	%	$	200,449		100.0	%
Cost of sales		175,965	70.6	%		141,417		70.6	%
Gross profit		73,146	29.4	%		59,032		29.4	%
Selling, general and administrative expense		61,889	24.8	%		51,188		25.5	%
Pre-opening expenses		4,050	1.6	%		2,914		1.5	%
Operating income		7,207	2.9	%		4,930		2.5	%
Interest expense		1,016	0.4	%		1,162		0.6	%
Income before income taxes		6,191	2.5	%		3,768		1.9	%
Income tax expense		2,503	1.0	%		1,562		0.8	%
Net income	$	3,688	1.5	%	$	2,206		1.1	%
Less preferred stock dividends		—				3,878
Net income (loss) available to common stockholders	$	3,688			$	(1,672	)
Net income (loss) per common share:
Basic	$	0.06			$	(0.23	)
Diluted	$	0.06			$	(0.23	)
Weighted average common shares outstanding:
Basic		57,435				7,401
Diluted		59,012				7,401

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Exhibit 2

Ulta Salon, Cosmetics & Fragrance, Inc.
Consolidated Statements of Income
(In thousands, except per share amounts)
(Unaudited)

	26 Weeks Ended				26 Weeks Ended
	August 2,				August 4,
	2008				2007
Net sales	$	488,409	100.0	%	$	394,562		100.0	%
Cost of sales		341,342	69.9	%		276,017		70.0	%
Gross profit		147,067	30.1	%		118,545		30.0	%
Selling, general and administrative expense		123,954	25.4	%		99,170		25.1	%
Pre-opening expenses		7,822	1.6	%		4,570		1.2	%
Operating income		15,291	3.1	%		14,805		3.8	%
Interest expense		1,931	0.4	%		2,158		0.5	%
Income before income taxes		13,360	2.7	%		12,647		3.2	%
Income tax expense		5,397	1.1	%		5,122		1.3	%
Net income	$	7,963	1.6	%	$	7,525		1.9	%
Less preferred stock dividends		—				7,621
Net income (loss) available to common stockholders	$	7,963			$	(96	)
Net income (loss) per common share:
Basic	$	0.14			$	(0.01	)
Diluted	$	0.13			$	(0.01	)
Weighted average common shares outstanding:
Basic		57,196				7,289
Diluted		59,000				7,289

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Exhibit 3

Ulta Salon, Cosmetics & Fragrance, Inc.
Condensed Consolidated Balance Sheets
(Subject to Reclassification)
(In thousands)

	August 2,		February 2,		August 4,
	2008		2008		2007
	(Unaudited)				(Unaudited)
Assets
Current assets:
Cash and cash equivalents	$	3,255	$	3,789	$	3,165
Receivables, net		19,164		20,643		14,295
Merchandise inventories, net		197,028		176,109		148,559
Prepaid expenses and other current assets		22,699		19,184		23,292
Deferred income taxes		9,063		9,219		5,476
Total current assets		251,209		228,944		194,787
Property and equipment, net		278,378		236,389		196,919
Deferred income taxes		4,080		4,080		4,125
Other assets		—		—		1,763
Total assets	$	533,667	$	469,413	$	397,594
Liabilities and stockholders’ equity
Current liabilities:
Current portion — notes payable	$	31,766	$	—	$	33,788
Accounts payable		40,630		52,122		41,010
Accrued liabilities		52,865		54,719		45,308
Accrued income taxes		4,374		5,064		—
Total current liabilities		129,635		111,905		120,106
Notes payable — less current portion		86,390		74,770		55,038
Deferred rent		93,291		71,235		56,651
Total liabilities		309,316		257,910		231,795
Commitments and contingencies
Series III redeemable preferred stock		—		—		4,792
Total stockholders’ equity		224,351		211,503		161,007
Total liabilities and stockholders’ equity	$	533,667	$	469,413	$	397,594

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Exhibit 4

Ulta Salon, Cosmetics & Fragrance, Inc.
Unaudited Non-GAAP Income per Basic and Diluted Share
(A Non-GAAP Financial Measure)

On October 30, 2007, the Company completed an initial public offering (IPO) in which it sold 7,666,667 shares of common stock. Also in connection with the IPO, the Company converted 41,524,002 preferred shares into common shares and paid in full approximately $93.0 million of accumulated dividends in arrears on its preferred stock.

The Company has provided non-GAAP adjusted income per basic and diluted share for the thirteen and twenty-six weeks ended August 2, 2008 and August 4, 2007 in this release, in addition to providing financial results in accordance with GAAP. This information reflects, on a non-GAAP adjusted basis, the Company’s net income and income per basic and diluted share after adjusting for the effects of the Company’s IPO. The As Adjusted net income per basic and diluted share reflects the following for all periods presented: (i) elimination of preferred stock dividends, (ii) conversion of the preferred shares and issuance of IPO shares as of the beginning of the period, and (iii) employee stock options and non-vested stock, due to their dilutive effects. The Company believes the non-GAAP adjusted income per basic and diluted share provides useful information to investors by reflecting income per share on a more representative basis with future operations. A reconciliation of this non-GAAP information to the Company’s actual results for the thirteen and twenty-six weeks ended August 2, 2008 and August 4, 2007 are as follows:

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Exhibit 4 (continued)

	(In thousands, except per share amounts)
	13 Weeks Ended						13 Weeks Ended
	August 2, 2008						August 4, 2007
	As Reported		Adjustments		As Adjusted		As Reported			Adjustments			As Adjusted
Net income	$	3,688	$	—	$	3,688	$	2,206		$	—		$	2,206
Less preferred stock dividends		—		—		—		3,878			3,878	(i)		—
Net income (loss) available to common stockholders	$	3,688	$	—	$	3,688	$	(1,672	)	$	3,878		$	2,206
Net income (loss) per common share:
Basic	$	0.06			$	0.06	$	(0.23	)				$	0.04
Diluted	$	0.06			$	0.06	$	(0.23	)				$	0.04
Weighted average common shares outstanding:
Basic		57,435		—		57,435		7,401		49,191		(ii)		56,592
Diluted		59,012		—		59,012		7,401		51,282		(iii)		58,683

	26 Weeks Ended						26 Weeks Ended
	August 2, 2008						August 4, 2007
	As Reported		Adjustments		As Adjusted		As Reported			Adjustments			As Adjusted
Net income	$	7,963	$	—	$	7,963	$	7,525		$	—		$	7,525
Less preferred stock dividends		—		—		—		7,621			7,621	(i)		—
Net income (loss) available to common stockholders	$	7,963	$	—	$	7,963	$	(96	)	$	7,621		$	7,525
Net income (loss) per common share:
Basic	$	0.14			$	0.14	$	(0.01	)				$	0.13
Diluted	$	0.13			$	0.13	$	(0.01	)				$	0.13
Weighted average common shares outstanding:
Basic		57,196		—		57,196		7,289		49,225		(ii)		56,514
Diluted		59,000		—		59,000		7,289		51,377		(iii)		58,666

(i)	Reflects the elimination of preferred stock dividend.
(ii)	Reflects preferred stock as if converted and 7,667 IPO shares as if outstanding for the entire period.
(iii)	Reflects preferred stock as if converted and 7,667 IPO shares as if outstanding for the entire period. Also includes employee stock options and non-vested stock, due to their dilutive effects.

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Exhibit 5

2008 Store Expansion

	Total stores open		Number of stores		Number of stores
	at beginning of the		opened during the		closed during the		Total stores open
Fiscal 2008	quarter		quarter		quarter		at end of the quarter
1st Quarter		249		17		1		265
2nd Quarter		265		18		0		283
			Gross square feet for
	Total gross square		stores opened or		Gross square feet for		Total gross square
	feet at beginning of		expanded during the		stores closed		feet at end of the
Fiscal 2008	the quarter		quarter		during the quarter		quarter
1st Quarter		2,589,244		170,599		9,596		2,750,247
2nd Quarter		2,750,247		188,322		0		2,938,569

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